Question

Jones Company reported pretax book income of $403,000. Included in the computation were favorable temporary differences of $50,300, unfavorable temporary differences of $20,150, and favorable permanent differences of $40,150. Book equivalent of taxable income is:

Answer 1

$362850

Step-by-step explanation:

First of all it is important that we know this:

The book equivalent of taxable income only takes permanent difference into consideration

Favorable income difference are then reduced from pretax but if they are found to be unfavorable they are added to pretax income.

Jones company have their pretax income to be equal to $403000

The favourable permanent difference is given as $40150

The equivalent of taxable income

= 403000 - 40150

= $362850

This is the answer to the question